BlackRock, the largest publicly listed asset manager with $1.36 trillion (â¬862bn) in assets under management, plans to restructure some of its closed-end funds and allow investors to redeem nearly $1.9bn in auction-rate preferred shares.

The company said it would redeem $860m to holders of the shares in five of its taxable, fixed-income funds and about $1bn in an undisclosed number of its tax-exempt funds.

This represents a total of about 19% of the $9.8bn in outstanding auction-rate preferred shares across 66 bond funds.

BlackRock is taking action as liquidity in this estimated $300bn class of securities has dried up as auctions continue to fail.

These securities, which are sold by mutual funds that use the proceeds from their sale to buy highly rated bonds, have their interest rates set by periodic auctions, known as Dutch auctions.

As long as these auctions have succeeded in matching buyers and sellers, investors considered auction rate preferred shares to be similar to cash in their liquidity.

But in recent months many of these auctions have failed, as potential buyers have been frightened by the credit meltdown in addition to fearing that struggling bond insurers would fail, thereby risking that bonds would have their credit ratings downgraded.

Many investors left holding these shares have been unable to redeem them for cash.

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BlackRock is using a combination of credit facility financing and reverse repurchase agreements to refinance the taxable closed-end funds, and tender option bond programs to refinance the tax-exempt funds.

The company said it would disclose more details about its plans in the coming months, and was also working on other ways to re-leverage its funds and provide more liquidity.

One of these ideas is to develop a put feature on the shares, which would enable money market funds to purchase them.

BlackRock said in a statement that this idea “is dependent on identifying third parties to provide liquidity commitments, demand for these instruments in the broader marketplace and obtaining necessary regulatory relief to make the [auction-rate preferred shares] eligible for purchase by money market funds.”

BlackRock is the latest asset manager to announce plans to use refinancing to allow investors to redeem.